3 Things Everyone Should Know

About the Availability Heuristic

READING TIME: 10 MINUTES

There are 3 things you should know about the availability heuristic:

1. We often misjudge the frequency and magnitude of events that have happened recently.
2. This happens, in part, because of the limitations on memory.
3. We remember things better when they come in a vivid narrative.

***

There are two biases emanating from the availability heuristic (a.k.a. the availability bias):
Ease of recall and retrievability.

Because of the availability bias, our perceptions of risk may be in error and we might worry
about the wrong risks. This can have disastrous impacts.

Ease of recall suggests that if something is more easily recalled in memory it must occur with
a higher probability.

The availability heuristic distorts our understanding of real risks.

“The attention which we lend to an experience is

proportional to its vivid or interesting character; and it is a
notorious fact that what interests us most vividly at the
time is, other things equal, what we remember best.”
— William James

When we make decisions we tend to be swayed by what we remember. What we remember is

influenced by many things including beliefs, expectations, emotions, and feelings as well as
things like frequency of exposure. Media coverage (e.g., Internet, radio, television) makes a
big difference. When rare events occur they become very visible to us as they receive heavy
coverage by the media. This means we are more likely to recall it, especially in the immediate
aftermath of the event. However, recalling an event and estimating its real probability are two
different things. If you’re in a car accident, for example, you are likely to rate the odds of
getting into another car accident much higher than base rates would indicate.
Retrievability suggests that we are biased in assessments of frequency in part because of our
memory structure limitations and our search mechanisms. It’s the way we remember that
matters.

The retrievability and ease of recall biases indicate that the availability bias can
substantially and unconsciously influence our judgment. We too easily assume that our
recollections are representative and true and discount events that are outside of our
immediate memory.

***

In Thinking Fast and Slow, Kahneman writes:

People tend to assess the relative importance of issues by the ease with which they are retrieved
from memory—and this is largely determined by the extent of coverage in the media.

***

Nobel Prize winning Social Scientist and Father of Artificial Intelligence, Herbert Simon,
wrote in Models of My life:

I soon learned that one wins awards mainly for winning awards: an example of what Bob
Merton calls the Matthew Effect. It is akin also to the phenomenon known in politics as
“availability,” or name recognition. Once one becomes sufficiently well known, one’s name
surfaces automatically as soon as an award committee assembles.

***

According to Harvard professor Max Bazerman

Many life decisions are affected by the vividness of information. Although most people
recognize that AIDS is a devastating disease, many individuals ignore clear data about how to
avoid contracting AIDS. In the fall of 1991, however, sexual behavior in Dallas was
dramatically affected by one vivid piece of data that may or may not have been true. In a
chilling interview, a Dallas woman calling herself C.J. claimed she had AIDS and was trying
to spread the disease out of revenge against the man who had infected her. After this vivid
interview made the local news, attendance at Dallas AIDS seminary increased dramatically.
Although C.J.’s possible actions were a legitimate cause for concern, it is clear that most of the
health risks related to AIDS are not a result of one woman’s actions. There are many more
important reasons to be concerned about AIDS. However, C.J.’s vivid report had a more
substantial effect on many people’s behavior than the mountains of data available. The
Availability Heuristic describes the inferences we make about even commonness based
on the ease with which we can remember instances of that event…

While this example of vividness may seem fairly benign, it is not difficult to see how the
availability bias could lead managers to make potentially destructive workplace decisions. The
following came from the experience of one of our MBA students: As a purchasing agent, he
had to select one of several possible suppliers. He chose the firm with whose name was the
most familiar to him. He later found out that the salience of the name resulted from recent
adverse publicity concerning the firm’s extortion of funds from client companies!

Managers conducting performance appraisals often fall victim to the availability heuristic.
Working from memory, vivid instances of an employee’s behavior (either positive or negative)
will be most easily recalled from memory, will appear more numerous than commonplace
incidents, and will therefore be weighted more heavily in the performance appraisals. The
recency of events is also a factor: Managers give more weight to performance during the three
months prior to the evaluation than to the previous nine months of the evaluation period
because it is more available in memory.

***

There are numerous implications for availability bias for investors.

A study by Karlsson, Loewenstein, and Ariely (2008) showed that people are more likely to
purchase insurance to protect themselves after a natural disaster they have just experienced
than they are to purchase insurance on this type of disaster before it happens.

Bazerman adds:

This pattern may be sensible for some types of risks. After all, the experience of surviving a
hurricane may offer solid evidence that your property is more vulnerable to hurricanes than
you had thought or that climate change is increasing your vulnerability to hurricanes.

Robyn M. Dawes, in his book Everyday Irrationality, says:

What is a little less obvious is that people can make judgments of the ease with which instances
can come to mind without actually recalling specific instances. We know, for example, whether
we can recall the presidents of the United States–or rather how well we can recall their names;
moreover, we know at which periods of history we are better at recalling them than at which
other periods. We can make judgments without actually listing in our minds the names of the
specific presidents.

This recall of ease of creating instances is not limited to actual experience, but extends to
hypothetical experience as well. For example, subjects are asked to consider how many
subcommittees of two people can be formed from a committee of eight, and either the same or
other subjects are asked to estimate how many subcommittees of six can be formed from a
committee of eight people. It is much easier to think about pairs of people than to think about
sets of six people, with the result that the estimate of pairs tends to be much higher than the
estimate of subsets of six. In point of logic, however, the number of subsets of two is identical
that of six; the formation of a particular subset of two people automatically involves the
formation of a particular subset consisting of the remaining six. Because these unique subsets
are paired together, there are the same number of each.
This availability to the imagination also creates a particularly striking irrationality, which can
be termed with the conjunction fallacy or compound probability fallacy. Often combinations
of events or entities are easier to think about than their components, because the combination
might make sense whereas the individual component does not. A classic example is that of a
hypothetical woman names Linda who is said to have been a social activist majoring in
philosophy as a college undergraduate. What is the probability that at age thirty she is a bank
teller? Subjects judge the probability as very unlikely. But when asked whether she might be a
bank teller active in a feminist movement, subjects judge this combination to be more likely
than for her to be a bank teller.

***

Retrievability (based on memory structures)

We are better at retrieving words from memory using the word’s initial letter than a random
position like 3 (Tversky & Kahneman, 1973).

In 1984 Tverksy and Kahneman demonstrated the retrievability bias again when they asked
participants in their study to estimate the frequency of seven-letter words that had the letter “n”
in the sixth position. Their participants estimated such words to be less common than seven
letter words ending in the more memorable “ing”. This response is incorrect. All seven letter
words ending with “ing” also have an “n” in the sixth position. However, it’s easy to recall
seven letter words ending with ing. As we demonstrated with Dawes above, this is another
example of the conjunction fallacy.

Retail locations are chosen based on search as well, which explains why gas stations and retail
stores are often “clumped” together. Consumers learn the location of a product and organize
their mind accordingly. While you may not remember the name of all three gas stations on the
same corner, your mind tells you that is where to go to find gas. Each station, assuming all else
equal, then has a 1/3 shot at your business which is much better than gas stations you don’t
visit because their location doesn’t resonate with your minds search. In order to maximize
traffic stores must find locations that consumers associate with a product.

***

Exposure Effect

People tend to develop a preference for things because they are familiar with them. This is
called the exposure effect. According to Titchener (1910) the exposure effect leads people to
experience a “glow or warmth, a sense of ownership, a feeling of intimacy.”

The exposure effect applies only to things that are perceived as neutral to positive. If you are
repeatedly exposed to something perceived as a negative stimuli it may in fact amplify negative
feelings. For example, when someone is playing loud music you tend to have a lot of patience
at first. However, as time goes on you get increasingly aggravated as your exposure to the
stimuli increases.
The more we are exposed to something the easier it is to recall in our minds. The exposure
effect influences us in many ways. Think about brands, stocks, songs, companies, and even the
old saying “the devil you know.”

***

The Von Restorff Effect

“One of these things doesn’t belong,” can accurately summarize the Von Restorff Effect (also
known as the isolation effect and novelty effect). In our minds, things that stand out are more
likely to be remembered and recalled because we give increased attention to distinctive items
in a set.

For example, if I asked you to remember the following sequence of characters

“RTASDT9RTGS” I suspect the most common character remembered would be the “9”
because it stands out and thus your mind gives it more attention.

The Von Restorff Effect leads us to Vivid evidence.

***

Vivid Evidence

According to William James in the Principles of Psychology:

An impression may be so exciting emotionally as to almost leave a scar upon the cerebral
tissues; and thus originates a pathological delusion. For example “A woman attacked by
robbers takes all the men whom she sees, even her own son, for brigands bent on killing her.
Another woman sees her child run over by a horse; no amount of reasoning, not even the sight
of the living child, will persuade her that he is not killed.

M. Taine wrote:

If we compare different sensations, images, or ideas, we find that their aptitudes for revival are
not equal. A large number of them are obliterated, and never reappear throughout life; for
instance, I drove through Paris a day or two ago, and though I saw plainly some sixty or eighty
new faces, I cannot now recall any one of them; some extraordinary circumstance, a fit of
delirium, or the excitement of hashish would be necessary to give me a chance at revival. On
the other hand, there are sensations with a force of revival which nothing destroys or decreases.
Though, as a rule, time weakens and impairs our strongest sensations, these reappear entire and
intense, without having lost a particle of their detail, or any degree of their force. M. Breirre de
Boismont, having suffered when a child from a disease of the scalp, asserts that ‘after fifty-five
years have elapsed he can still feel his hair pulled out under the treatment of the ‘skull-cap.’–
For my own part, after thirty years, I remember feature for feature the appearance of the theater
to which I was taken for the first time. From the third row of boxes, the body of the theater
appeared to me an immense well, red and flaming, swarming with heads; below, on the right,
on a narrow floor, two men and a woman entered, went out, and re-entered, made gestures, and
seemed to me like lively dwarfs: to my great surprise one of these dwarfs fell on his knees,
kissed the lady’s hand, then hid behind a screen: the other, who was coming in, seemed angry,
and raised his arm. I was then seven, I could understand nothing of what was going on; but the
well of crimson velvet was so crowded, and bright, that after a quarter of an hour i was, as it
were, intoxicated, and fell asleep.

Every one of us may find similar recollections in his memory, and may distinguish them in a
common character. The primitive impression has been accompanied by an extraordinary degree
of attention, either as being horrible or delightful, or as being new, surprising, and out of
proportion to the ordinary run of life; this it is we express by saying that we have been strongly
impressed; that we were absorbed, that we could not think of anything else; that our other
sensations were effaced; that we were pursued all the next day by the resulting image; that it
beset us, that we could not drive it away; that all distractions were feeble beside it. It is by force
of this disproportion that impressions of childhood are so persistent; the mind being quite fresh,
ordinary objects and events are surprising…

Whatever may be the kind of attention, voluntary or involuntary, it always acts alike; the image
of an object or event is capable of revival, and of complete revival, in proportion to the degree
of attention with which we have considered the object or event. We put this rule into practice
at every moment in ordinary life.

An example from Freeman Dyson:

A striking example of availability bias is the fact that sharks save the lives of swimmers.
Careful analysis of deaths in the ocean near San Diego shows that on average, the death of each
swimmer killed by a shark saves the lives of ten others. Every time a swimmer is killed, the
number of deaths by drowning goes down for a few years and then returns to the normal level.
The effect occurs because reports of death by shark attack are remembered more vividly than
reports of drownings.